A client has Incentive Stock Options. He sells the stock at the same time he exercises the option. As a result, he pays ordinary income tax on the bargain element, and says he receives a tax form showing FICA taxes being paid. The client is retired and has no other income other than social security and pension income. Client is age 66.

If he in fact is receiving a W-2 as a result of this transaction, is the amount in Box 1 of the W-2 considered compensation that would allow him to make a deductible IRA contribution? Is it considered deferred compensation, and therefor not qualified as income that would allow an IRA contribution?

Thanks!